Market Overview

The market size of cloud services (IaaS/PaaS) was estimated at 2.28 trillion yen in 2024, which is 118.1% of the preceding year (based on the sales at businesses). The migration of operating systems and data has become a major market driver, particularly among large enterprises. Many organizations are adopting cloud migration strategies, in which they "lift and shift" their information systems (an application and its associated data) from an on-premises environment to cloud infrastructures. In recent years, an increasing number of companies have begun migrating mission-critical systems to the cloud, resulting in a significant rise in the volume of data managed on cloud platforms. As most cloud services operate on a pay-as-you-go (PAYG) model, the growing number of systems and expanding data volumes directly contribute to higher cloud usage fees, thereby fueling the growth of the cloud services market. Additionally, it is worse noting that, following the announcement in December 2023 by a major provider of virtualization software to discontinue perpetual licensing for their products, there has been a sharp increase in cloud migration demand from customers running systems on that platform.

The advancement of digital transformation (DX) is also accelerating the growth of the cloud services market. The perception of DX has shifted from being merely a tool for operational efficiency to a strategic approach for gaining competitive advantage and maximizing corporate value. Additionally, the increase of enterprises adopting Data-Driven Management (a decision-making approach that leverages data and analytics to guide strategic and operational decisions) is further contributing to market expansion.

Moreover, cloud integration services offered by IT vendors that support the introduction and operation of cloud computing for user companies are becoming increasingly widespread. As a result, the overall environment for using cloud infrastructure is improving steadily. These developments have lowered the barriers to implementing and managing cloud, encouraging more companies to adopt cloud-based infrastructure.

Noteworthy Topics

Currently, the central theme of presentations at annual events held by major cloud vendors revolves around generative AI. In contrast to previous years, when the main focus was primarily on infrastructure enhancements and performance improvements, these events now clearly highlight generative AI as a strategic priority for each company. Cloud providers are offering a range of generative AI-related services, including platforms for developing AI and end-user applications.

Furthermore, major cloud vendors view the next phase of cloud is the wide adoption of AI agents. While there is no universal definition for what constitutes an AI agent, it is generally described as a collection of software programs with advanced reasoning capabilities that can autonomously perform tasks based on given instructions. Leading cloud vendors have already equipped their platforms with AI development function that allow users to build their own AI agents. By managing multiple AI agents in an integrated manner, it becomes possible to autonomously execute complex, high-level business processes. However, AI agents are not expected to fully replace human involvement. Instead, a symbiotic relationship between humans and AI is anticipated, where AI agents handle preliminary processes, while humans remain responsible for final decisions.

Future Outlook

The cloud infrastructure (IaaS/PaaS) service market is forecasted to expand steadily to reach 4.49 trillion yen by 2028. One of the factors driving market growth is the full-scale cloud migration of mission-critical systems. With improvements in security, high availability (consistent accessibility), and enhanced cloud integration services from IT vendors, the migration of mission-critical systems to the cloud is expected to accelerate.

The penetration of the use of generative AI also boosts market growth. User companies are increasingly looking for ways to use generative AI to improve operational efficiency and create new value. Cloud vendors are expanding their AI-related services, and IT vendors are strengthening their services to support the introduction and operation of AI environments for user companies. However, in some cases, companies adopt generative AI only as a proof of concept (PoC) without progressing to full-scale deployment. To address this challenge, IT vendors must enhance support for users by optimizing workflows and helping develop organizational structures suited for AI implementation. This will enable companies to integrate and operate generative AI more effectively. The spread of AI is expected to increase computational resources and data volume required on cloud infrastructure and contribute to an expansion of the cloud infrastructure (IaaS/PaaS) service market.

Research Outline